On Oct. 23, Luc Papineau, vice president and general manager, brokerage, Desjardins Group, announced his retirement in an internal memo. The news surprised many advisors.

In uncovering the story behind Papineau’s departure, Finance et Investissement (FI) granted anonymity to several sources so they could speak freely without fear of reprisal.

Appreciated by colleagues and respected by advisors, Papineau was a “fabulous ambassador for Desjardins Securities,” said one source. “It’s a shame to lose a talent like that. Luc had a lot of experience in the industry,” she added.

Others called Papineau an excellent boss.

Desjardins confirmed to FI that Papineau’s departure won’t happen for “another few months” in order to facilitate the transfer of responsibilities to his successor, Marjorie Minet.

“I can confirm the appointment of Marjorie Minet as vice president, advisory services, wealth management,” wrote Desjardins Group spokesperson Chantal Corbeil in an email. Until recently, Minet was senior director, business administration, brokerage and private management.

“Marjorie Minet knows what she’s doing. She’ll make a good vice president for Desjardins Securities,” said an industry source.

“Minet is well thought of. She does a good job. Maybe things will blow over and we won’t be talking about this anymore in another year,” added Marc Jobin, formerly vice president, full-service brokerage at Desjardins Securities, and now retired.

The transition period should help Minet, because “the climate isn’t great” at Desjardins Securities, said the industry source, adding, “She’s well organized, so I’m not worried for her.”

“She’s a top-notch talent,” another person declared.

FI tried unsuccessfully to obtain interviews with Minet; Éric Lachaîne, senior vice president, caisse network and member and client services; and Guy Cormier, president and CEO.

Corbeil noted that Desjardins is not ready to talk about the action plan for Desjardins Securities just yet.

“It’s too early to grant an interview on the restructuring, be it with Éric Lachaîne or Marjorie Minet,” wrote Corbeil in her email. “In another few months, Ms. Minet should be in a position to explain her vision and the steps she took to implement her strategy.”

From “enemy” to top executive

The challenging climate is due in part to ongoing restructuring at Desjardins Group, which is affecting Desjardins Securities. In April 2018, Vincent Hogue had to leave his position as senior vice president and head of personal services at Desjardins Wealth Management. Papineau took over part of his duties.

In early 2019, Lachaîne surprised advisors by announcing a significant drop in referrals to Desjardins Securities from the caisse network he manages.

At that time, an industry source anticipated that Desjardins Group, like other financial institutions, was moving toward a model where financial services are provided by salaried advisors. Profit margins from such services are thought to be higher than those generated by full-service brokerage divisions. But the proof of higher margins isn’t apparent yet.

In 2016, Desjardins Securities boosted referral compensation to caisse branches, following complaints from the latter. As a result, investment advisor compensation at Desjardins Securities was cut.

“Desjardins Securities had a way higher referral rate than other big Canadian banks,” Papineau told FI last March. “What we’re doing now is re-establishing a balance and ensuring that [our] private management services and brokerage services all get their fair share of business. There may have been an imbalance in the past. So a readjustment is being made. It’s like any change—there’s some turbulence involved.”

Lachaîne’s early 2019 announcement sparked uncertainty, according to comments from investment advisors interviewed anonymously for the 2019 Top 8 Quebec Brokerage Report Card. “There’s a culture of change happening right now. We don’t know where we’re going. People are worried,” said one advisor.

Some of the advisors surveyed for the ranking said the relationships with the caisse network were problematic. “There’s a shift to Desjardins culture. Desjardins Securities has lost its soul,” claimed one advisor.

Lachaîne is “viewed a little like an enemy” to investment advisors, according to one source who spoke to FI in October.

Speaking in October, Jobin explained the advisors’ concerns: “If you’re told that your business growth from referrals is going to decline and eventually peter out, that creates uncertainty. So you need to think differently and grow your business in a more conventional way.”

He added that new guidelines on referrals have sowed doubts as to the value of the advisors’ books of business, which many rely on to fund their retirement.

The restructuring has continued. In late September 2019, Gregory Chrispin, senior vice president, wealth management and life and health insurance at Desjardins Group for more than three years, left his position. He was replaced by Denis Dubois, who now also holds the position of president and CEO of Desjardins Financial Security.

At the end of October, it was Papineau’s turn to retire.

According to one source, Lachaîne is now senior vice president in charge of Desjardins Securities, but Corbeil did not confirm this.

Advisors fear coming under the management of a senior vice president “who doesn’t necessarily have a good grasp of the business,” said Yves Néron, a former Desjardins Securities senior executive who now works as a consultant.

Signature Service gains momentum

“It’s Desjardins Signature Service that’s gaining momentum now,” one source said. Desjardins Signature Service (DSS) targets clients with at least $250,000 in investible assets and offers services such as life and health insurance and mortgage financing.

DSS allows caisse managers to hold on to clients they would otherwise have referred to Desjardins Securities in the not-so-distant past, indicated one source. Desjardins Securities advisors have often benefited from these referrals over the years, so much so that their books contain a proportion of names coded as referrals.

Desjardins is such a dominant presence in some regions that referrals account for the majority of Desjardins Securities clients in these areas.

Unlike clients at other full-service bank brokerages, clients at Desjardins remain Desjardins’ network clients once they’ve been referred. Over time, this ongoing relationship has led to tensions between the caisse network and advisors at Desjardins Securities.

“Advisors don’t need that kind of hassle. They have to concentrate on their clients and movements in the financial markets. It’s important that they don’t lose that focus on account of too much internal politicking,” said a source.

DSS ready to buy back books?

According to two sources, DSS is ready to buy back books of business from investment advisors so they become caisse employees. “That’s a big change. A lot of advisors will accept the offer because they have no other choice,” a source affirmed.

The same person said advisors with smaller or less desirable books stand to gain from the arrangement, whereas those with bigger books are frustrated with the situation.

One thing seems certain: Desjardins Securities’ competitors are likely to step up their poaching efforts in light of recent turbulence. In the full-service brokerage business, competing firms often woo client-rich advisors in the aim of growing through talent acquisition.